Great article Soham! Could you please elaborate on this para a bit more- ''The only way fintechs, like Freo, Instant Pay and Razorpay X can make money is by lending. So they enter into an agreement with their partner banks to be offered a line of credit of up to 80% of the mobilized savings at a facility fee of 3%. In turn, the fintechs lend to their customers at 18-20%. They pocket 15-18% of the spread, after paying the facility fee.''
1) How is the spread 15-18%?
2) What do you mean by mobilized savings, are these the deopsits that are brought in by fintechs for Partner banks?
3) And the line of credit is offered by partner banks for 80% of these deposits fintechs bring in at just 3%?
Could you please state an example for the above? Perhaps some fintech who models its business like this?
1. If I pay a facility fee of 3% for capital, that I wish to lend - my cost of capital is 3%. I earn 18-21% off my customers when I lend it to them. I can pocket 15-18% after I pay the facility fee back, as my net interest income
2. Mobilized Savings = a fancy term for shoring up savings and parking it in a bank. Like "Jan Dhan Yojana mobilized rural savings"
3. I cannot take particular names, as these arrangements are very fluid and anyone who wishes to discredit us can do it fairly quickly by calling us inaccurate. Most fin-techs(hint: these fintechs have both arms: lending & saving) are operating on these terms - give or take!
Great article Soham! Could you please elaborate on this para a bit more- ''The only way fintechs, like Freo, Instant Pay and Razorpay X can make money is by lending. So they enter into an agreement with their partner banks to be offered a line of credit of up to 80% of the mobilized savings at a facility fee of 3%. In turn, the fintechs lend to their customers at 18-20%. They pocket 15-18% of the spread, after paying the facility fee.''
1) How is the spread 15-18%?
2) What do you mean by mobilized savings, are these the deopsits that are brought in by fintechs for Partner banks?
3) And the line of credit is offered by partner banks for 80% of these deposits fintechs bring in at just 3%?
Could you please state an example for the above? Perhaps some fintech who models its business like this?
Best,
Pankaj
1. If I pay a facility fee of 3% for capital, that I wish to lend - my cost of capital is 3%. I earn 18-21% off my customers when I lend it to them. I can pocket 15-18% after I pay the facility fee back, as my net interest income
2. Mobilized Savings = a fancy term for shoring up savings and parking it in a bank. Like "Jan Dhan Yojana mobilized rural savings"
3. I cannot take particular names, as these arrangements are very fluid and anyone who wishes to discredit us can do it fairly quickly by calling us inaccurate. Most fin-techs(hint: these fintechs have both arms: lending & saving) are operating on these terms - give or take!